I have to admit – part of me admires new Indian Prime Minister Narendra Modi for singlehandedly blocking a new World Trade Organization agreement to streamline customs procedures throughout the global economy. The proposed deal falls considerably short of a global trade game-changer. In fact, its main value seems to be in showing that the WTO has not become completely moribund now that its members have deadlocked on a significant world trade liberalization deal, and many have ramped up efforts to reach regional agreements like the Trans-Pacific Partnership instead.
Nonetheless, Modi was under heavy international pressure to cave in, and resisted. His rationale? “Do we choose feeding our poor or getting good press world-wide?” I have no idea whether the food stockpiles other WTO countries found so objectionable actually do prevent hunger in India, or represent the best way to do so. But I was impressed to see a leader unabashedly prioritizing his own nation’s interests over those of some abstract “global community” or supposed set of “global norms” in language that would have made his Israeli counterpart Binyamin Netanyahu proud.
At the same time, India’s ability to veto an entire global trade agreement all by itself spotlights one of the WTO’s biggest structural flaws, and one so serious from Day One that it should have convinced Washington to stay out: the organization’s requirement, carried over from its predecessor global trade body, that decisions be made by a consensus of the entire membership if at all possible.
In this way, the WTO differs fundamentally from other international organizations, like the United Nations and the International Monetary Fund. In those bodies, an outsized share of the real power was given to the strongest, wealthiest countries, in the form of the Security Council and its veto provision at the UN, and in the form of weighted voting at the IMF. By contrast, the WTO in effect established equal power for all countries, regardless of their characteristics.
This egalitarianism was mainly codified because most of the world’s national economies viewed it as vital for achieving one of their highest priority goals – reining in America’s legal authority to act unilaterally to advance or defend its trade interests. For a world heavily dependent on exporting to the United States to achieve and maintain prosperity, few developments could be more dangerous. Fortunately for these U.S. competitors, American trade policy was (as today) tightly controlled by offshoring and importing interests, and Washington agreed to a system bound to leave the U.S. market open much wider than other national markets.
But as made clear by Modi’s gambit, consensus-based decision-making also gives grossly outsized influence to countries whose real-world attributes merit nothing of the kind. Of course, India has an enormous population, and has made impressive strides alleviating poverty and modernizing its economy. Relatively speaking, however, it remains a pygmy, representing only 3.03 percent of global output as of last year.
Because there’s nothing even close to a worldwide consensus on acceptable trade and related economic practices, no conceivable WTO reforms can solve the problem – at least on a basis acceptable to the United States. Instead, Washington should take full advantage of the opt-out provision of its WTO accession agreement and leave the organization at the next opportunity (which comes up in 2015). As American leaders never should have forgotten, the best guarantors of U.S. security, independence, and prosperity have always been its own power and wealth – not the useless-at-best and potentially dangerous illusions of international law and institutions.